Real Estate Sees Fragile Bits Of Life

June 24, 2009|From news services

Sales of previously occupied homes rose modestly in May over April, the third monthly increase this year, but signs of a housing recovery are fragile at best.

The National Association of Realtors said Tuesday that existing-home home sales rose 2.4 percent, to a seasonally adjusted annual pace of 4.77 million, up from a downwardly revised rate of 4.66 million in April. The results, however, came up short of analysts' expectations.

"While activity has stabilized, a meaningful recovery has yet to begin," wrote Paul Dales, U.S. economist with Capital Economics.

The bursting of the housing bubble helped push the U.S. economy into the worst financial situation in seven decades. Now the economy is hindering the recovery of the real estate market. As companies shed jobs, more cash-strapped homeowners are predicted to go into foreclosure.

About one in three homes sold last month was a foreclosure or distressed sale, dragging down the median price to $173,000-16.8 percent below a year ago. Falling prices coupled with new rules for property appraisers have caused many transactions to fall apart or be delayed.

One bright spot was that the number of unsold homes on the market at the end of May fell 3.5 percent, to nearly 3.8 million. That's a 9.6 month supply at the current sales pace, compared with about 6 months' worth typically. The drop was "the best news in the report," said Joseph LaVorgna, Deutsche Bank's chief economist.